“We think we can find the best deals in Canada, so we’re going to keep on doing that.”
Montréal-based venture capital (VC) firm Brightspark Ventures has closed its latest fund for early-stage Canadian technology startups with over $100 million CAD in total commitments and added a new partner in Vancouver to capture more British Columbia (BC) deal flow.
Brightspark, which launched Brightspark Canadian Opportunities Fund II (BCOF II) in May 2023 with $60 million, held its final close last month. With BCOF II, which marks the industry-agnostic 25-year-old firm’s fourth overall fund, Brightspark plans to keep leading seed to Series A rounds for tech startups across Canada as it looks to hit more “home runs.”
“We’re very excited about what’s happening in BC.”
Sophie Forest,
Brightspark Ventures
“We think we have a competitive advantage in Canada,” Brightspark partner Sophie Forest told BetaKit in an exclusive interview. “We’ve been around for a long time. We’re known, we know the market, we know the co-investors, we’re connected to the founders, and we think we can find the best deals in Canada, so we’re going to keep on doing that.”
Despite its past wins and lengthy track record, Brightspark ultimately fell shy of its initial $120-million target for BCOF II—which it had previously hoped to close before the end of 2023—amid what has become a particularly tough VC fundraising environment. After many invested heavily in VC when the market was hot, Canadian limited partners (LPs) have become more cautious and selective during the tech downturn, which has led to missed targets and longer fundraising timelines for Canada’s VC firms.
Forest said Brightspark is still happy that it managed to raise $100 million in these conditions, and pleased with the makeup of BCOF II’s LP base, which includes a large number of institutions, strong support from existing backers, and a slew of new investors.
“It’s really a strong base for the future in terms of our ability to carry on the franchise,” she added.
Through BCOF II, Brightspark plans to build a portfolio of 12 to 18 companies. The firm has made two investments to date via BCOF II, backing Montréal’s Deep Sky, which is developing large-scale carbon removal facilities to combat climate change, and Toronto-based Forcen, an advanced manufacturing startup working on force-sensing technology for robotic automation.
With BCOF II, Brightspark has expanded its investment team and presence across Canada with a new Vancouver partner, Andrew Lugsdin, who brings more than 20 years of experience in VC to Brightspark. While Brightspark’s team is based primarily in Montréal and Toronto, the firm has always invested across Canada. With Lugsdin aboard, Forest said Brightspark will begin doing so in a more organized way in Western Canada.
Lugsdin, who previously served as a partner at BDC Capital’s Information Technology Venture Fund and a founding partner at Toronto-based Framework Venture Partners, will help Brightspark deploy more funding in BC, where Forest said the firm had been looking to hire for some time.
“We’re very excited about what’s happening in BC,” Forest added.
Lugsdin joins Forest, Brightspark founder Mark Skapinker, Jacques Perreault and Éléonore Jarry-Ferron as partners for BCOF II, which brings Brightspark’s total assets under management to more than $500 million.
According to Forest, all of the LPs from BCOF I returned for BCOF II with either the same amount or bigger cheques, save for the Government of Canada’s Venture Capital Catalyst Initiative (VCCI), which only backed Brightspark when it was exploring a new model, and the Bank of Montréal, which she said has ceased investing in early-stage funds.
Forest claimed Brightspark was able to garner support from existing LPs quickly and reach a first close within six months. The real challenge, she said, was securing commitments from new investors. The latter took time and a lot of due diligence, owing partly to Brightspark having been around for so long. “They turned every rock,” Forest said. “They looked at everything.”
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Existing Brightspark backers, including Investissement Québec, Fondaction, Fonds québécois d’amorçage Teralys (financed by CDPQ), and Royal Bank of Canada returned to support BCOF II alongside undisclosed high-net-worth individuals and family offices from Brightspark’s network. Desjardins Capital and Fonds de solidarité FTQ became first-time investors in BCOF II last year, and they were joined by fellow new Brightspark LPs Venture Ontario, BDC Capital, Teralys Capital, and the New Brunswick Innovation Foundation as part of this final close.
Brightspark is one of Canada’s longest-standing VC investors, but the firm’s journey has not been linear. Created in 1999 by Skapinker, Brightspark debuted with a traditional institutional VC fund of $65 million in 2000. Forest joined in 2003, and in 2006, Brightspark followed up its first fund with a second, $60-million fund.
The firm shifted its investment strategy in 2010 after deciding that the Canadian tech ecosystem was not mature enough. To create more deal flow, Brightspark began helping launch and incubate companies, which led to interest from individuals looking to back those startups alongside Brightspark. Given this, the VC firm changed its investment model, and focused on investing via special purpose vehicles (SPVs) between 2011 and 2020.
Sensing that the Canadian tech ecosystem had matured enough to warrant another institutional fund, four years ago, Brightspark returned to its roots with BCOF I, its third institutional fund. Brightspark launched BCOF I in 2020 with $60 million and eventually closed the fund at $66.5 million, short of its $75-million goal.
Since then, Brightspark has continued to use SPVs to let others invest alongside BCOF I, and plans to keep doing so with BCOF II. Brightspark’s SPV network includes more than 600 investors, who have collectively injected over $64 million into 23 companies to date. “For us, it’s really a kind of tool we have to be more flexible in the deals we do,” Forest said.
Brightspark’s portfolio currently includes about 16 active companies and 14 exits, including the sale of Toronto data-centre management software company Think Dynamics to IBM in 2003 and the acquisition of Fredericton social-media monitoring company Radian6 for $326 million in 2011. Brightspark has generated an $80-million return from backing Radian6, a $50-million return from its investment in Montréal travel tech giant Hopper (in which it still holds a stake), and a 35x return on its investment in Toronto jewelry startup Jewlr.
Amid the tech downturn, many Canadian VCs, including two of Canada’s largest investors in the space, BDC Capital and Georgian Partners, have been forced to mark down some of their investments. Asked whether Brightspark has had to take similar steps, Forest acknowledged that Brightspark has had to mark down a few undisclosed companies that did not meet expectations, but claimed that this did not have a major impact on their return to date as “they were mostly linked to smaller investments that were kept at cost in our books.”
BCOF I has backed startups like Callia, DrugBank, Optable, Potential Motors, Potloc, and Vetster. Asked about the performance of BCOF I so far, Forest claimed, “BCOF I’s portfolio is still in the early stages and in this market, it takes time for companies to mature and exit. Despite that, the return of the fund is positive and past the J Curve.”
With BCOF II, Forest said Brightspark plans to keep taking big swings on startups tackling large problems like climate and supply chain challenges. “Every time we do a deal, we need to think we can return the fund,” she added.
“We look for really big, ambitious ideas, and we’re willing to back [them].”
Feature image courtesy Brightspark Ventures.
